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What is a Margin Calculator?
Knowing the margin is essential before engaging in F&O trading. A margincalculator helps you find just that. It is an online tool that helps youcalculate the required margin for F&O trading.
The margin calculator can also be used to calculate the margin foroption buying or option selling and for different F&O strategies whentrading in equity, commodity, or forex.
Types of margins
There are different types of margins that the calculator calculates.These include the following:
SPAN Margin
The SPAN margin is the most basic and primary in an F&O trade.SPAN stands for Standardized Portfolio Analysis of Risk. It measuresthe maximum loss that the portfolio can incur under differentoutcomes. The SPAN margin is revised six times a day, so the marginvalue changes depending on when you use the calculator.Exposure margin
The exposure margin is an additional margin collected to protect thebroker's liability in an adverse market.Value at Rise (VaR) margin
The Value at Risk (VaR) margin measures the probability of a loss inan asset's value based on the statistical analysis of its historicalprice movements and volatility.Extreme Loss margin
The extreme loss margin is calculated to factor in the losses thatmight occur beyond the VaR margins. It is deemed to be the highestof the following two values:- 5% of the value of the asset's position.
- 1.5 times the standard deviation of the daily logarithmic returnsof the asset's price over the last six months.
How to use a margin calculator?
The margin calculator calculates and shows different margins basedon your inputs. To use the calculator, enter the following details:
- Select Exchange: NFO, CDS, NCX or NCDEX
- Select Product Type: Futures or Options
- Select Symbol: This is a variable field depending on your choiceof contract (e.g.: NIFTY, BANKNIFTY or any stock)
- Select Net Quantity: Input the net quantity you want to trade for.
- Choose Between Buy or Sell
Based on these inputs, the combined margin requirement of the SPANmargin and exposure margin will be shown. You will also be able tocheck out the individual margin values.
So, when trading in futures and options, know the marginrequirements for a hassle-free trade. Use the margin calculator fora quick and accurate assessment of margins required, fulfil therequirement and trade easily.
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Margin Calculator FAQs
What is a margin calculator?
An online margin calculator is a simple computation tool that helpsyou calculate the margin requirement ontrade easily. These calculators depend on user input to determinethe outcome.
What is the margin for F&O?
Margin is the amount payable to take a position in the derivativemarket. Whether you are trying to buy or sell, the broker willcollect the margin upfront as a cushion to cover for the risk causedby market volatility.
The margin collected at the beginning of the trade is called initialmargin, calculated on the basis of the assumption that you will holdthe position till the expiry date.
How is the margin calculated?
To calculate the total margin, you need to compute SPAN margin andexposure margin separately. It is a complex calculation, but now youcan calculate your margin requirement easily by using an onlinemargin calculator. These calculators use a simple algorithm andcompute the final result based on user input.
How to use a margin calculator in Angel One?
Angel One margin calculator lets you calculate margin requirementsupfront. You need to input data like Exchange, Product, Quantity,and Buy/Sell to calculate the result. It is a simple tool anddoesn’t require technical expertise to use.
What is the SPAN margin requirement and how is it measured?
Before you take a position in F&O trade, you need to assess theSPAN margin requirement, which is equivalent to the maximum lossamount you can suffer under different market conditions. The processof determining the SPAN margin involves complex calculation andtakes into consideration various parameters.
- Underlying risk
- Historical volatility of the underlier
What is the margin requirement to transact in the cash market?
From September 2020, SEBI has changed the margin requirement fortrading in the cash market. For intraday trading also traders nowhave to deposit 20 percent of the transaction volume with the brokerto avail margin facility.
You can pledge existing securities in yourDEMAT accountas collateral. Ask your broker for a complete updated list ofinvestment instruments that you can use as collateral.
What is the calendar spread margin for F&O?
Spead refers to simultaneously purchasing a futures contractexpiring on a particular date and selling another futures contractwith a different expiry date. Since it involves multipletransactions, the formula to calculate margin on calendar spread isthe following.
Total margin = SPAN Margin + Calendar spread charge+ Exposure margin
The margin is calculated on the delta of the spread. In a calendarspread, the margin value equates the one-third of the mark to themarket value of the far month contract.
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